Georgetown Law and Peer Monitor Report Urges Law Firms to Re-examine Traditional Business Models
February 1, 2013 —
The Center for the Study of the Legal Profession at Georgetown Law and Peer Monitor today issued its “2013 Report on the State of the Legal Market.” The report highlights how recent trends in the legal market are placing increasing stress on the traditional law firm partnership model. It also urges firms to re-examine their traditional business models and be willing to embrace new assumptions about the legal services marketplace.
“Firms are being challenged to refocus their strategies and take steps to manage their businesses more effectively. They are scrambling to address the rapidly shifting legal marketplace,” said James W. Jones, senior fellow at the Center for the Study of the Legal Profession at Georgetown Law, and lead author of the report. “The good news is that many firms are beginning to see positive results from these efforts. Almost all law firm leaders are acknowledging that fundamental changes are occurring in the market and the need to act decisively to address them.”
The report finds that law firm partnerships are under pressure due to the disparity in compensation between the highest and lowest paid equity partners and a failure of law firm leadership to set and manage partner expectations. It says that partners are feeling increasingly disenfranchised, and law firms, caught between profit pressures and client demands, are struggling to strike an appropriate balance between models that provide necessary centralized management and structures that preserve the essential independence of professional judgment.
The report examines how the market for legal services in the U.S. and throughout the world has changed. “A combination of sluggish growth in demand for legal services, declining productivity, falling realization rates and the need for further expense reductions led to modest growth, at best, for law firms in 2012,” said Mark Medice, program director of Peer Monitor. “Without changes in course, we could be in for another year of financial doldrums.”
The report addresses new approaches in strategic focus, thinking and flexibility that could help law firms deliver legal services more efficiently and build more sustainable models of law firm practice.
According to the report, some of the factors that have the potential to further alter the shape of the legal market include the rapid pace of globalization and persistent overcapacity in the market, as well as growing pressures on the traditional partnership model.
The “2013 Report on the State of the Legal Market” is available here: http://www.law.georgetown.edu/continuing-legal-education/executive-education/upload/2013-report.pdf.